06.11.202412:32 Forex Analysis & Reviews: EUR/USD on November 6. Trump's victory sets stage for USD strength

Hi, dear traders! On Tuesday, the EUR/USD pair rose to the resistance zone of 1.0929–1.0946. A rebound from this zone favored the US dollar and pushed the price sharply below the support zone at 1.0781–1.0797. However, this strong dollar's rally was certainly caused not by a technical signal. Preliminary US election results were released overnight, giving the dollar a significant boost.

The wave structure is straightforward. The last completed upward wave did not break the peak of the previous wave, while the new downward wave easily broke the low of the prior wave. Thus, the EUR/USD pair is still forming a new bearish trend. A corrective wave can be considered complete, with bulls having lost all momentum in the market. Regaining it would require a lot of effort from the bulls, which is unlikely to happen soon.

The information background on Tuesday was of little interest. The entire world is focused on the US elections, waiting for results. Before the voting began, the odds for Trump and Harris were roughly 50/50. However, this morning, it was reported that Donald Trump had secured the 270 electoral votes needed for victory. In my view, we should wait for the official results, but it appears that the Republican has won and is becoming the "new, old president" of the United States. The more than 2-cent surge in the dollar overnight was undoubtedly tied to this factor. On Wednesday morning, bearish traders continue to mount aggressive attacks. In my opinion, it doesn't make any sense to speculate on how much more the dollar could rise in the coming days. Tomorrow is the FOMC meeting, and traders won't overlook this event. The Federal Reserve's stance may soften after the October Nonfarm Payrolls report, which could lead to a drop in the US dollar as early as tomorrow. Currently, trader activity is very high, which is not always favorable. I don't expect the dollar index to climb another 200-300 pips in the near term.

On the 4-hour chart, the EUR/USD pair reversed in favor of the dollar and fell to the 76.4% correction level at 1.0747. A consolidation below this level would signal a further decline towards the next correction level at 100.0% – 1.0603. Today, no emerging divergences are observed in any indicators.

Commitments of Traders (COT)

In the latest reporting week, speculators opened 6,154 long contracts and 27,934 short contracts. The Non-commercial group's sentiment has turned bearish. The total number of long contracts held by speculators is now 159,000, while short contracts total 209,000.

Large players have been primarily reducing their holdings in the euro for eight consecutive weeks. I believe this could indicate a new bearish trend or at least a significant correction on a global scale. The key factor driving the dollar's decline—anticipation of the FOMC's easing monetary policy—has already been priced in, leaving the market with no strong reason to sell the US dollar en masse. These reasons could emerge over time, but the dollar's appreciation remains more likely. Technical analysis also supports the beginning of a bearish trend. Thus, I am preparing for a prolonged decline in the EUR/USD pair.

Economic calendar for the US and Eurozone

Eurozone: Services PMI in Germany (08:55 UTC)

Eurozone: Services PMI (09:00 UTC)

Eurozone: ECB President Christine Lagarde's speech (14:00 UTC)

On November 6, the economic calendar includes another speech by Christine Lagarde. The information background may have a moderate impact on market sentiment that day. So, we should keep in mind the US elections and their influence on the market.

EUR/USD forecast and trading tips

This week, it's crucial to exercise extreme caution with any positions. The US elections and the FOMC meeting could trigger high volatility and unpredictable movements.

Fibonacci levels are drawn from 1.1003 to 1.1214 on the 1-hour chart and from 1.0603 to 1.1214 on the 4-hour chart.